CFPB Charges Payday Lender with Predatory Lending Practices
The CFPB filed a Complaint against a payday lender, alleging that the company (i) concealed the option of a free repayment plan to consumers struggling to repay their short-term, high-cost loans and (ii) made electronic withdrawals of consumers' money without their authorization.
In the suit, filed in the U.S. District Court for the Northern District of Texas, the CFPB alleged that the lender used deceptive language and waterfall scripts to mislead borrowers into refinancing loans, with many not knowing that free repayment plans existed and that they could switch to one without incurring additional fees. These practices allegedly resulted in more than $240 million in fees paid by borrowers.
The CFPB further alleged that the lender lied about the number of times it would attempt to withdraw repayment funds from the borrowers' bank accounts, and made more attempts than authorized by the terms of the borrowers' contracts. This allegedly resulted in the lender illegally debiting a total of at least $1.3 million from at least 3,000 borrowers' accounts.
Based on this conduct, the CFPB asserted that the lender violated Section 1031 ("Prohibiting unfair, deceptive, or abusive acts or practices") and Section 1036 ("Prohibited Acts") of the Consumer Financial Protection Act. Among other things, the CFPB is seeking (i) injunctive relief, (ii) damages and (iii) civil money penalties.
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